Fringe benefit tax (FBT): Calculating fringe benefit tax

Alternate rate calculation process

Note

From 1 October 2010 personal tax rates have changed, so the higher FBT rate of 61% has reduced to 49.25%. The following information is using the rates from 1 October 2010 onwards. If you are calculating your FBT requirements for periods prior to 1 October 2010, you will need to use the previous rates.

How it works

The alternate rate calculation process allows an employee's fringe benefits to be taxed at their marginal tax rate. It ensures that fringe benefits of employees earning less than $70,000 are not over-taxed (as they may be under the single rate option). An alternative is the short form alternate rate option.

Note

Calculations used to complete the alternate rate options are calculated in your annual income year or in the fourth/final quarter returns (quarters 1 to 3 should be calculated using the single rate option of 49.25% or the alternate rate option of 43%).

If you want to use the alternate rate system to calculate fringe benefit tax on an employee's fringe benefits:

You should be aware of some specific issues if you are calculating fringe benefit tax for shareholder-employees or employees receiving attributed income.

You will need more information

To complete the alternate rate calculation process, you need to know:

cash remuneration details for each employee to whom fringe benefits have been attributed

the taxable value of the fringe benefits that have been attributed to individual employees.

Complete the calculations for your annual return or, if you file on a quarterly basis, as part of the final quarter return.

Follow these steps to calculate the net cash remuneration

Calculate the net cash remuneration. Use the table below to calculate the tax on gross cash remuneration.

2009-10 income tax rates

Employee's gross cash
remuneration

Tax rate
per dollar

Cumulative
balance

$0 to $14,000

12.5%

$1,750.00

$14,001 to $48,000

21%

$8,890.00

$48,001 to $70,000

33%

$16,150.00

$70,001 and higher

38%

-

2010-11 income tax rates

Employee's gross cash
remuneration

Tax rate
per dollar

Cumulative
balance

$0 to $14,000

11.5%

$1,610.00

$14,001 to $48,000

19.25%

$8,155.00

$48,001 to $70,000

31.5%

$15,085.00

$70,001 and higher

35.5%

-

2011-12 income tax rates

Employee's gross cash
remuneration

Tax rate
per dollar

Cumulative
balance

$0 to $14,000

10.5%

$1,470.00

$14,001 to $48,000

17.5%

$7,420.00

$48,001 to $70,000

30%

$14,020.00

$70,001 and higher

33%

-

Add the value of attributed fringe benefits to the net cash remuneration calculated in step 1. This is the employee's fringe benefit-inclusive cash remuneration.

Calculate the tax payable on the fringe benefit-inclusive cash remuneration (that is, the answer to step 2), using the rates below:

2009-10 alternate rates

Income range

Tax rate

Cumulative balance

$0 to $12,250

14.29%

$1,750.00

$12,251 to $39,110

26.58%

$8,890.00

$39,111 to $53,850

49.25%

$16,150.00

$53,851 and higher

61.29%

-

2010-11 alternate rates

Income range

Tax rate

Cumulative balance

$0 to $12,390

12.99%

$1,609.00

$12,391 to $39,845

23.84%

$8,154.00

$39,846 to $54,915

45.99%

$15,085.00

$54,916 and higher

55.04%

-

2011-12 alternate rates

Income range

Tax rate

Cumulative balance

$0 to $12,530

11.73%

$1,469.00

$12,531 to $40,580

21.21%

$7,419.00

$40,581 to $55,980

42.86%

$14,019.00

$55,981 and higher

49.25%

-

From the tax payable on the fringe benefit inclusive cash remuneration (that is, the answer to step 3), deduct tax calculated in step 1 on the cash remuneration. The result is the FBT payable on that employee's fringe benefits.

Example

During 2009-10 Ted, an employee, receives a salary of $50,000, a bonus of $2,000, and fringe benefits of $5,000.

His employer follows the four steps of the alternate rate calculation process:

Deduct the tax calculated in step1 from the tax payable to get the FBT payable.
$12,671.00 less $10,210 = $2,461.00

The FBT payable on Ted's fringe benefits is $2,461.00.

Other calculations you need to do

As well as calculating the FBT payable based on the above steps, you must:

include calculations for non-attributed benefits taxed at the single rate:

2009-2010 - 49% (or 61% for major shareholder-employees)

2010-2011 - 45.99% (or 55.04% for major shareholder-employees)

2011-2012 - 42.86% (or 49.25% for major shareholder-employees)

make an adjustment for the fringe benefit tax assessed in quarters 1 to 3 if you are a quarterly filer.

Keeping your records

When you use the alternate rate calculation process, you must maintain records that will confirm the amount of fringe benefit tax you have calculated. The Fringe benefit tax guide (IR409) gives more information on the records you should keep.

If you are completing the FBT alternate rate calculation sheet, you can transfer the totals for each employee from the calculator to the FBT alternate rate calculation sheet for your records. The taxable value calculation sheets show the taxable value for each category of fringe benefits. For more detail on the records required for each category, see: